It’s Time for Draghi to Talk About the Elephant in the Room

Mario Draghi is finally having the talk he has long sought to avoid. The European Central Bank president opened a debate about the future path of stimulus on Wednesday after the Governing Council was presented with various scenarios for winding down asset purchases, according to people familiar with the matter.

For months, Draghi put off a discussion, concerned about low inflation and wary of market turmoil at any hint of an exit. Now, as the risk increases that leaving a decision too late makes investors jumpy, the challenge is to find a way to begin dialing down quantitative easing while providing assurance that any moves will be gradual.

In starting the debate on policy normalization, Draghi followed through on a July pledge to start talks in the fall. Still a formal announcement on the next step may not come before the October meeting. “They are entering a decision-making phase,” said Bjoern Eberhardt, head of global macro analysis at Credit Suisse in Zurich. “There are a lot of aspects that need to be looked at — there’s also the problem of bond scarcity, which will become an issue towards the middle of next year.” …